After rejecting pain-in-the-pocketbook fixes, the board of the teacher pension fund expects next
week to approve diverting $100 million in annual employer health-care contributions to shore up
pension assets and earnings.

State law requires state pension plans to be positioned to pay off their unfunded liabilities
within 30 years. The system for teachers hovers at an impermissible 40-year payoff, even after
recent reforms that reduced benefits.

Stronger-than-expected investment returns and other moves will whittle the number to 36 years,
legislators were told yesterday, and the shift of health-care funds is projected to whittle another
four years off that number.

Michael Nehf, executive director of the system for teachers, heard warnings from legislators on
the Retirement Study Council that they are keeping a close eye on the system and its $72 billion in
pension assets.

Shifting funds from the flush — and optional — $3.4 billion health-care fund would drop its
projected payout life span from 49 years to 20 years, Nehf said.

But the board would divert the money for only a matter of years, not long term, and then
potentially make “catch-up” payments to the health-care fund once the pension fund meets the
30-year standard, Nehf said.

The chairman of the study council, Rep. Lynn Wachtmann, R-Napoleon, chided the teacher pension
system for pursuing what he called “one of the more-dangerous solutions” after it rejected any
decrease in benefits or increase in contributions.

“I think it is something we need to be most watchful of,” Wachtmann said after the meeting. “
We'll see what happens ... I’m not at all pleased with director Nehf and the board’s response.”

Sen. Dave Burke, R-Marysville, said the teacher pension plan’s fix-it remedy is “not
sustainable,” and he called for the board to quickly remedy its problems.

The retirement system serves more than 480,000 active, inactive and retired teachers and college
and university professors. Last year, it paid $6.5 billion in benefits to about 149,000 retired
educators.